GMS on his housin policy vs SDP

[Kinana]

Yup. In Hong Kong, public rental flats constitute a massive 30% to 40% and still growing. People will have more money for consumption or savings until they could afford their first private property.

For those on the sliding side, Hong Kong govt sold flats to those earning less than a certain amount of salary at cost without land cost. But not like what SDP has proposed. They could sell their flats in the open market, under two categories: Green card and White card. Green card holders are those with lower salary income and they do not need to top up the land cost to HK govt while those white card holders will have to pay HK govt the land cost when purchasing such flats from second hand market.

I would add an additional percentage of capital gain tax on the sellers if the price of the sales is above 100% or 150% of initial price they bought from HK govt. This will be a fair system.


Goh Meng Seng

Is that the reason why they live in chicken coops over there?

 

[mojito]

Without the means of benefiting from potential capital gains, most probably these people who buy these flats will not have upward mobility because by the time they want to upgrade or change flats to stay, they will not have the means to do it. They may even have problems buying another flat from HDB because they will be selling their own flat back to HDB at very low prices.

If I am going to rent the flat, I would rather pay monthly rental instead, keeping my options of moving out any time. It doesn't make any sense for me to help the "REAL PROPERTY OWNER" to pay for all cost of construction without actually owning it at all. The restrictions put on such flats are impractical to start with.

There are better policy options and you may be surprised, Hong Kong has more advanced housing policy options than Singapore.


Goh Meng Seng

GMS, you need to understand that under SDP's plan, a "prepaid rental" flat does not entail the tenant to pay everything upfront. That is my understanding. Actual payments made by the tenant will still resemble monthly rental of the unit at government subsidized rates. Is it fiscally prudent for any government to allow tenants to benefit from capital appreciation? Why would anybody want to buy HDB homeowners in the first place?

I highly doubt HK's baseline housing policies are superior to SG's but I'll let it slide for now. Homeowners can always sub-lease their units to tenants but the issue of affordability might prevent them from doing so. It is fiscally irresponsible to add additional pressure to program costs by insisting that tenants get a cut in capital appreciation. This is akin to "vote buying". I see no defensible response to that accusation.

 

[aurvandil]

If the payment is akin to monthly rental and the terms are such that there is no capital appreciation, how is it different from a rental flat? It is a bad policy proposal from SDP because the proposal has all the limitations of a rental flat but none of the benefits (i.e. flexibility of a short term lease that allows a renter to quickly restructure based on changing circumstances).

Actual payments made by the tenant will still resemble monthly rental of the unit at government subsidized rates.

 

[Goh Meng Seng]

You got it wrong here. The tenants here will have to pay upfront... taking a loan from banks, paying them interests and pay HDB full cost upfront. Although the tenants will pay monthly mortgage payment but this includes interests payment as well.

BTW, under SDP's scheme, these flats "owners" cannot sub rent their flat or room out.

Goh Meng Seng

GMS, you need to understand that under SDP's plan, a "prepaid rental" flat does not entail the tenant to pay everything upfront. That is my understanding. Actual payments made by the tenant will still resemble monthly rental of the unit at government subsidized rates. Is it fiscally prudent for any government to allow tenants to benefit from capital appreciation? Why would anybody want to buy HDB homeowners in the first place?

I highly doubt HK's baseline housing policies are superior to SG's but I'll let it slide for now. Homeowners can always sub-lease their units to tenants but the issue of affordability might prevent them from doing so. It is fiscally irresponsible to add additional pressure to program costs by insisting that tenants get a cut in capital appreciation. This is akin to "vote buying". I see no defensible response to that accusation.

 

[mojito]

If the payment is akin to monthly rental and the terms are such that there is no capital appreciation, how is it different from a rental flat?

No different except maybe higher under the "prepaid" scheme. To compensate for that, there is ownership transfer to the tenant, who would eventually become an owner of a non-tradeable resource.

 

[Goh Meng Seng]

The Hong Kong's policy option is superior because it helps those who are in need of them, using limited resources in a targeted way. It will self adjust in the long term if there are transactions made on the resale market, correcting the market distortion due to such scheme in the process. It provides the possibility of upward mobility for the lower income segment.

Goh Meng Seng

 

[Kinana]

Why not just keep the current system but increase supply n offer lower housing prices and let the effect spread throughout the market? Easier right?

 

[Goh Meng Seng]

Technically speaking, you don't own anything here, with the restrictions on rental and sales of the resource. Just "custodian", paying the whole construction of the flat for the use of it.


Goh Meng Seng

No different except maybe higher under the "prepaid" scheme. To compensate for that, there is ownership transfer to the tenant, who would eventually become an owner of a non-tradeable resource.

 

[aurvandil]

When crafting policy, it is best to keep it simple and have dedicated policy instruments for dedicated policy goals.

If the goal is to provide affordable public housing, then we should be looking at the cheapest possible rental housing scheme that gives users maximum flexibility to restructure and change according to their life's circumstances.

If you want to provide for people's retirement, you should be looking at a proper retirement fund that pays contributors sufficient returns to provide for their retirement.

What the PAP have done is make their public housing scheme into money making scheme to pay for retirement. This is so that they can have access to compulsory CPF savings at the ridiculous interest rate of 2.5%. They then take this money to make all sort of funky investments via Temasek and GIC.

No different except maybe higher under the "prepaid" scheme. To compensate for that, there is ownership transfer to the tenant, who would eventually become an owner of a non-tradeable resource.

 

[mojito]

Technically speaking, you don't own anything here, with the restrictions on rental and sales of the resource. Just "custodian", paying the whole construction of the flat for the use of it.


Goh Meng Seng

Yes. I believe the aim is to ensure the tenant-turned-"owner" do not have further obligations and liabilities after the flat is fully paid up. Under the HK system the tenant pays indefinitely, no?

 

[BuiKia]

Never take a person who claims he has encounter with aliens seriously.

 

[mojito]

It is a bad policy proposal from SDP because the proposal has all the limitations of a rental flat but none of the benefits (i.e. flexibility of a short term lease that allows a renter to quickly restructure based on changing circumstances).

Agree. The rental system is superior because it is a more flexible approach but it places economic risk on the housing agency. Furthermore I am uncertain if the cost of managing excess supply could be substantial.

 

[Goh Meng Seng]

As I have said, the flats sold by the HK govt is much cheaper because there is no land cost. The only problem, of course, is that it is still pretty high after that discount of land cost. That is why there is still a bulk of rental flats needed for the masses.

Having said that, people who stay in rental flats have more cash in hand because they are not burdened by heavy mortgage payment. The key idea is that if you are really unable to own a flat, don't force it. You may enjoy life much better if you just pay cheap rent for government flats. But to ask people to make prepaid rental in advance and incurring interests, is not something very desirable here. You are short-changed for better living standards (i.e. more cash in hand) when you are actually renting the flat! What for?


Goh Meng Seng

Yes. I believe the aim is to ensure the tenant-turned-"owner" do not have further obligations and liabilities after the flat is fully paid up. Under the HK system the tenant pays indefinitely, no?

 

[mojito]

When crafting policy, it is best to keep it simple and have dedicated policy instruments for dedicated policy goals.

If the goal is to provide affordable public housing, then we should be looking at the cheapest possible rental housing scheme that gives users maximum flexibility to restructure and change according to their life's circumstances.

If you want to provide for people's retirement, you should be looking at a proper retirement fund that pays contributors sufficient returns to provide for their retirement.

What the PAP have done is make their public housing scheme into money making scheme to pay for retirement. This is so that they can have access to compulsory CPF savings at the ridiculous interest rate of 2.5%. They then take this money to make all sort of funky investments via Temasek and GIC.

I agree with the approach of keeping it simple. The whole public housing debacle is ironic because current "owners" cannot monetize their homes even when it has increased 10 fold. All public housing should be NOM in my humble opinion, and we can start by having new units under the NOM scheme. If tenant-owners have the means to upgrade to private properties, they will have the full rights and privileges of private ownership.

 

[mollusk]

Why not just keep the current system but increase supply n offer lower housing prices and let the effect spread throughout the market? Easier right?

True...but will HDB lower housing price in the first place..?

 

[Goh Meng Seng]

There is only one problem here. Why make these "tenants" pay interests when they could well be making use of these money to earn interests or returns from other investment, so that they could save money faster to upgrade to better housing options? This is why I feel that SDP's policy option doesn't make sense at all.

Goh Meng Seng

I agree with the approach of keeping it simple. The whole public housing debacle is ironic because current "owners" cannot monetize their homes even when it has increased 10 fold. All public housing should be NOM in my humble opinion, and we can start by having new units under the NOM scheme. If tenant-owners have the means to upgrade to private properties, they will have the full rights and privileges of private ownership.

 

[mojito]

Having said that, people who stay in rental flats have more cash in hand because they are not burdened by heavy mortgage payment. The key idea is that if you are really unable to own a flat, don't force it. You may enjoy life much better if you just pay cheap rent for government flats. But to ask people to make prepaid rental in advance and incurring interests, is not something very desirable here. You are short-changed for better living standards (i.e. more cash in hand) when you are actually renting the flat! What for?


Goh Meng Seng

Do Honkies have a public pension scheme like CPF? If not, allowing citizens to have higher discretionary spending power would just add to the risk of the city devolving into a welfare state further down the road. My preference is to have citizens take responsibilities for their own retirements. Don't live beyond your means. Your statement reflects exactly what I fear about a rental flat system.

 

[Goh Meng Seng]

Hong Kong has MPF but this is not allowed to be used for housing mortgage payment because it is at very low percentage. 5%, if I am not wrong. But MPF doesn't work like CPF. You can choose what to invest according to your own risk adversity. The Government doesn't give you a fixed interest like CPF does. This is specifically for retirement financing and nothing else, not for education, healthcare or housing... whatever.

Don't be a nanny state. You will have to form a public consensus and mindset that everyone should be responsible for their own well being, including retirement financing. The government will only step in when you face problems for whatever reasons.

Goh Meng Seng

Do Honkies have a public pension scheme like CPF? If not, allowing citizens to have higher discretionary spending power would just add to the risk of the city devolving into a welfare state further down the road. My preference is to have citizens take responsibilities for their own retirements. Don't live beyond your means. Your statement reflects exactly what I fear about a rental flat system.

 

[mojito]

There is only one problem here. Why make these "tenants" pay interests when they could well be making use of these money to earn interests or returns from other investment, so that they could save money faster to upgrade to better housing options? This is why I feel that SDP's policy option doesn't make sense at all.

Goh Meng Seng

Sometimes inflation adjusted instruments are better than absolute returns from investment products. Would you be thrilled to know your stocks have appreciated 5% when inflation is at 7%? If the government mismanages the economy, as the PAP government had by allowing inflation to skyrocket through untamed property market, then they should be made to cough out the difference, preferably in their term in office. Inflation adjustment might do the trick.

 

[mojito]

Hong Kong has MPF but this is not allowed to be used for housing mortgage payment because it is at very low percentage. 5%, if I am not wrong. But MPF doesn't work like CPF. You can choose what to invest according to your own risk adversity. The Government doesn't give you a fixed interest like CPF does. This is specifically for retirement financing and nothing else, not for education, healthcare or housing... whatever.

Don't be a nanny state. You will have to form a public consensus and mindset that everyone should be responsible for their own well being, including retirement financing. The government will only step in when you face problems for whatever reasons.

Goh Meng Seng

I think there are a lot more people who are not careful with their money than otherwise. Take it as lifelong learning, and possibly leaving a legacy for your loved ones when one passes on.